IBM Center for Applied Insights (CAI) has recently started a new program on building fact-based, market-centric thought leadership assets on various facets of mobile money.

As I dig deeper to understand the current state and evolving trends of this segment, some facts are worth noticing: Consultative Group to Assist the Poor. (CGAP) estimates that around 3.5 billion people worldwide currently lack access to formal financial services. It estimates that there will be 1.7 billion unbanked customers with mobile phones by 2012. There are more than 165 pilots in the mobile money segment in emerging economies being run by a diverse group of organizations.

However, very few mobile money deployments have been able to achieve scale and gain significant customer base. Some deployments which have been able to achieve significant scale include M-Pesa in Kenya, GCASH and Smart Money in Philippines, Vodacom in Tanzania, and MTN Uganda.

Hence, there is definitely a huge potential to achieve scale in this segment, especially in the emerging markets, and firms are investing hard to address this market. However, many of them are still struggling to fully tap into this opportunity. Cracking the code for high customer adoption and usage, in quantity and continuity, appears to be an Achilles’ heel for the Mobile Network Operators (MNOs), financial institutions, and other organizations trying to venture into this segment.

So, what insights can we learn from those who have succeeded in this segment? I researched to determine some common factors which seem to have made some deployments more successful than others. It seems that there are two broad factors which can prove to be very critical for an organization while trying to launch and subsequently scale: the actual product and an effective agent network. Today, we’ll take a look at the impact of the product.

Product– Building a strong, robust and compelling product offering (and later a product portfolio) is a very important factor which is sometimes overlooked as many companies try to emulate successful offerings and solutions from other deployments.

Some of the key points to keep in mind are:

Company’s vision and long term strategy – Most of the successful companies have a well-defined long term vision and strategy with respect to offering mobile money services. For instance, a company can aspire to be the leading low cost provider for person-to-person transfer services or it can aspire to be a leading service provider in the retail payments segment. A clear vision also helps senior management develop a long term commitment to the service. This often takes substantial initial funding towards mobile money deployments and at least three to five years to become profitable.

Specific needs of the market – A clear and articulated value proposition, in terms of addressing the ‘market specific’ needs for mobile money, goes a long way towards ensuring success of the deployment. There is no ‘One size fits all’ business model or offering which can cater to different markets in the emerging or the developed economies. For example, M-Pesa has gained its popularity and scale by uniquely positioning the product to address the remittance need of the Kenyan population; its value proposition being: “send money home.” WIZZIT in South Africa focuses on “live life anywhere” by addressing the mobile banking needs of their consumers. Other avenues can be business-to-business payments, bill pay, salary payments, and so on. In the planning phase, a thorough market research can help develop a deep understanding of consumer’s pain points in the specific market which can be addressed effectively by the mobile money deployment.

Product/Concept awareness – The bulk of potential consumers in the emerging markets are from the informal economy, people who are unbanked and use other formal and informal means such as post offices, banks, or personal networks for money transfer. This target segment is mostly unaware of the potential for and features of newly launched mobile money offerings. They also have security apprehensions associated with mobile money transfers and lack of initial technology understanding. For example, some of my colleagues were initially worried about security of their payments while using newly launched mobile payments services by BharatiAirtel. Hence, a concerted and targeted marketing campaign goes a long way in addressing the apprehensions of the target segment.

Essential Features –This target customer base from the informal segment in emerging economies wants the service to be Fast (Instant transfer of money over long distance and without any queues), Inexpensive (in comparison to costlier credit/debit cards or informal payment methods), Safe (Holding value and making payments that is safer than holding and transacting cash) and Accessible (able to cash out, make purchases, and receive money in remote areas). For example, as per a white paper by IBM, cost of sending 1000 Ksh ($13.06) through M-Pesa is $0.38 which is cheaper than any other service available in Kenya such as PostaPay and Bus Company.

Right Partnerships – Research suggests that making the right partnerships at the right time helps a) align the business and its new/existing products with the overall vision on an ongoing basis, b) continuously learn and address the needs, challenges and new demands of the market and c) expand and reach scale. The partnerships can be with technology partners, banks and financial institutions, MNOs, agent networks, retail chains and other corporate organizations.

For example, Bank Bradesco and the Post Office in Brazil have partnered to create Banco Brazil. The partnership has been able to effectively attract rural populations boosting the business of both companies. Another interesting partnership is in Japan, a developed economy. Sony partnered with DoCoMo, a MNO, to form a joint venture – FeliCa Networks. They produced both the mobile phone chip and card reader which enable them to manage downloads and applications for consumers and merchants and gain a strong foothold in the mobile payment market.

There is a lot to be learned and written on the effective management of agent networks. The agent network is the effective face of the company for consumers. I can try to explore this factor in more detail in one of my subsequent posts. Look forward to your comments and observations.

Let’s start with some startling facts about the consumer products and goods (CPG) industry. Failure rates of new product innovations are estimated to be higher than 70 percent globally. Still, more than 80 percent of traditional marketers make decisions based on gut feel and past experiences, instead of using scientific approaches that unlock new insights (for example, advanced analytics).

Today, CPG companies are wrestling with a host of market challenges related to market, retailer and technology. Some of the significant challenges faced by the CPG companies include:

Market – Volatile commodity prices and shifts in global supply and demand increasingly influence the gross profit margins of CPG companies. Large multi-national CPG companies have global supply chains and they sell globally, hence their profit margins are affected by the cyclical movements of currencies, economies and other macro-economic factors in a country.

Retailer – The increasing clout of retailers in the marketplace poses significant challenge to the CPG companies. The big retailers are getting even bigger and more powerful. CPG companies face pressure from the retailers to reduce prices. There is a lack of collaboration/partnership with the retailers as retailers continue to limit access to consumer data and insights. CPG companies increasingly find it challenging to obtain approval from retailers for executing their plans and strategies. Maintaining retailer’s loyalty also becomes a big ongoing challenge for the CPG companies.

Technology – Keeping pace with exponential increase in data and associated analysis and technological developments has always been a challenge for the CPG companies. Companies are struggling with integrating data across channels and functions, cleaning and standardizing it and churning it with the help of advanced analytics to produce actionable insights.

These are all important challenges worthy of attention for the market participants, in order to survive and compete in the marketplace. Still, the manufacturers should start focusing on the one thing that can inform their product development, improve their operational effectiveness, increase their competitiveness and boost their profits - the consumer.

The presence of today’s technology-enabled empowered, omni-channel consumer affects how CPG companies control costs, grow sales, coordinate a wide variety of trade activities, manage time and manage the customer (retailer) relationship. These consumers are empowered by an abundance of information, technology and choices. Their expectations from the companies have increased in terms of ongoing engagement and constant experience across channels. And they can champion or sully the reputation of a brand at the click of a mouse. Their constant online and offline engagement with companies and their products generate a lot of data about their shopping behavior and preferences. That is why, manufacturers should start taking their end consumers more seriously as this knowledge can inform various functions like sales, supply chain, IT etc. across the companies (and not just marketing) and help companies transform their entire value chain. This would help them to anticipate consumer need s and proactively plan for them. This can also help them collaborate with retailers and gain a seat at the decision maker’s desk.

Many CPG companies, globally, have started to realize this need of strong consumer focus and are deploying dedicated resources and advanced analytics to develop consumer centric capabilities. For example, in its 2011 category leadership study by Kantar retail, when retailers were asked which manufacturers ranked among the top three in consumer/shopper insights and category management, Procter & Gamble (41.9%), Kraft Foods (37.1%) and PepsiCo (27.0%) came out on top, with General Mills a hair width behind (26.9%).

We, at the IBM Center for Applied Insights, have been working on a comprehensive global study of over 350 CPG senior executives to gain more quantitative and qualitative insights about the increasing consumer focus of these CPG companies. The focus of this study would be to understand market trends, the need for consumer orientation, who are the leaders, how they are doing it and the results achieved.

Watch out this space for more insights and information on the release of forthcoming executive presentation, info-graphic and white paper.

I look forward to your comments and observations. Please click “Add a Comment” below or “More Actions” to share this with others.